Maravi

(HERALD) Government to increase royalties

Government to increase royalties
Saturday, 16 July 2011 11:17 Business
By Darlington Musarurwa

GOVERNMENT will be adjusting royalties that are paid by foreign mining houses upwards while at the same time increasing levies on agricultural sectors such as cotton, tobacco and wildlife breeding in the five years through 2015 in order to augment revenue flows to the Treasury.

According to the Medium Term Plan (MTP) that was launched a fortnight ago — and expected to be the premier plan for fiscal and monetary policies from 2010 to 2015 — theadjustments will be aligned to the performance of the sectors.

On the overall, Government forecasts that growth in the mining sector will rise to 44 percent this year but ease to 20 percent in 2012.

However, growth is expected to moderate to 18,3 percent, 19,4 percent and 8 percent in 2013, 2014 and 2015 respectively.

Though the rates of increases in royalties are not spelt out in the MTP, a zero draft that was crafted earlier on by the authorities shows that it is proposed that the royalties for coal miners be reviewed from 1 percent to 5 percent for foreign-owned mining firms, 2 percent for joint venture companies and 1 percent for local companies.

Tariffs for base metals were also expected to climb from 2 percent to 10 percent for foreign mining houses, with joint venture companies and local firms being levied at 6 percent and 3 percent correspondingly. Similar increases were also proposed for precious metals.

However, tariffs for precious stones were projected to rise from the current 10 percent to 12 percent for foreign miners, 7,5 percent for joint ventures and 5 percent for local companies.

“Levies will be appropriately charged to ensure that there is continued investment in particular areas. This continued investment would guarantee growth. Levies will be charged in areas like cotton, tobacco, timber, wildlife breeders, among others.

“Government will intensify collection of levies and royalties and institute measures to plug leakages. Special tax audits will be undertaken to plug leakages, tax evasion and curb transfer pricing by major corporations.

“The MTP will review levies and royalties to ensure that the economy benefits from its rich natural resources,” reads part of the MTP.

It is expected that the funds that will be raised will be pooled into a sovereign wealth fund that will subsequently be used to sponsor “development of all provinces of Zimbabwe and all communities where the mining operations will be taking place”.

Local policymakers contend that royalties, which are meant to enable countries to get a direct and fair share from exploitation of mineral resources, must take into account the level of local ownership and local beneficiation initiatives.

Government has, however, continued to raise concern on the small revenues that are accruing to the fiscus from the various levies that are charged on mining activity.

Statistics from the Ministry of Finance indicate that Treasury only managed to gather US$34 million in the first six months of this year from money tolled on mining activity, which is 24 percent lower that the targeted US$25 million.

Low revenues have prompted Government to heighten its call to indigenise foreign mining houses.

Under the current indigenisation and empowerment legislation, mining companies are expected to submit their proposals for indigenisation to the authorities before the end of the year.

There has also been increased focus on generating revenues from resurgent sectors such as tobacco and cotton.

More than 200 million kilogrammes of tobacco is projected to go under the hammer in the current marketing season, while rising prices for cotton have ensured that there would be increased deliveries from farmers.

The Agricultural Marketing Authority (AMA) is believed to be actively considering introducing a levy for cotton ginners that will be used to develop the sector.

Government notes that for the MTP growth and development targets to be met a total investment of US$9,2 billion is required and it is envisaged that the money will be raised mainly from internally generated resources.

Apart from focusing on internal resources, policymakers project that there is likely to be huge capital injections from developmental partners such as the Development Bank of South Africa (DBSA) into various infrastructure projects.

For example, the DBSA intends to loan US$1,3 billion into the Beitbridge to Chirundu road.

The commercialisation, privatisation and restructure of parastatals, including forecasted increases in lines of credit, are also expected to bankroll the MTP.

During the period between 2010 and 2015, Government targets to grow the economy by an average 7 percent per annum, while employment is projected to increase by 6 percent per annum.-The Sunday Mail

Labels: MINING, TAXATION, ZIMBABWE

posted by MrK @ 4:02 PM